Wednesday, December 8, 2010

Job openings in the US rose in October for the first time in three months, a sign gains in payrolls will accelerate in early 2011. The number of positions waiting to be filled increased by 351,000 to 3.36 million, the most since Aug 2008, the Labor Department said. Excluding a drop among government agencies, the 369,000 increase in openings at companies was the biggest in four years. Combined with declining claims for jobless benefits and surveys showing hiring at manufactures and service providers is picking up, report may help ease concern the labor market lost momentum in November. The government reported last week that the world’s largest economy created 39,000 jobs for the month, fewer than the most pessimistic forecast of economists surveyed by Bloomberg News. (Bloomberg)

Crude Oil prices (January contract) dropped below $89 a barrel after an intraday high above $90. The EIA said supplies from countries outside the OPEC are seen rising by 1 million barrels a day in 2011.

Gold declined below $1405 an ounce after a new record high just above $1430 while Silver came back below $30 an ounce as a firm U.S. dollar sparked a profit taking move on precious metals.

Copper (March contract) rose above $4.04 a pound. A strike in a Chilean mine that lasted more than 30 days has ended.

PETALING JAYA: Tong Herr Resources Bhd said the European Commission had terminated the anti-dumping and anti-subsidy proceeding concerning imports of certain stainless steel fasteners and part thereof originating in India and Malaysia.
“The company is of opinion that the termination of the anti-dumping and anti-subsidy proceeding will have a positive effect for the sales to Europe,” it said in a filing with Bursa Malaysia.

Monday, December 6, 2010

Markets rebounded last week with better economic data from the US, and an easing in concerns over the European debt crisis. The Hang Seng index was up 1.94%, the KOSPI index was up 2.92%, Nikkei was up 1.38%, the S&P 500 index was up 2.2%. Only the STI index was marginally down 0.8%. Oil prices also rose to a 25 month high of 91.42 USD per barrel. Pending sales of U.S. existing houses unexpectedly jumped a 10 percent in October, according to the National Association of Realtors. It was widely expected to fall. Also, retail sales rose the most in 8 months in November, going up 6% year on year.(based on a survey of close to 30 retailers by Thomson Reuters.) Adjusting for shifts in when holidays occurred, it was the biggest increase since September 2006. The conference board also reported that its main US consumer confidence index rose to a 5 month high of 54.1, up from a revised 49.9 in October. This was a big jump in US consumer confidence.

Overall, the various indicators were showing that the US economy was doing better than what many economists were expecting. The only negative indicator was jobless rate, which rose to hit 9.8% in November, despite the US economy continuing to add jobs. However, as we mentioned before, unemployment numbers tend to be a lagging indicator rather than a forward one, so we don’t see this as an indicator that the US economy is about to slump. Ben Bernanke, the US Federal Reserve Chairman said that the economy was barely expanding at a sustainable pace and that it’s possible that the Fed may expand bond purchases beyond the 600 billion USD announced last month to spur growth. This was seen as positive amongst equity markets in Asia, as the additional liquidity was likely to find its way into emerging markets, including Asia. His comments also caused the US dollar to weaken and commodity prices accordingly strengthened, especially oil prices.

Oil prices have continued their upward trend, as we anticipated, and this is likely to continue as the dollar weakens. This is because the global economy is recovering, and demand for oil is likely to rise gradually. However, as oil is usually denominated in US dollars, then as the US dollar weakens, it will then cause oil prices to move up.

There was some easing of concerns in Europe over the ongoing debt crisis. Spain finance minister Elena Salgado said that Spain would not need international aid. The ECB president Jean‐ Claude Trichet also challenged the region’s political leaders to do more to get their budget deficits under control.

Overall, we expect to see many of these years concerns start to subside next year, and when they do, investors will refocus on corporate earnings, which are forecast to be very strong. So, we continue to expect equities to outperform bonds going forward, well into next year, with attractive valuations further underpinning a strong potential for a bull run next year.